Lester Feder: I want to start by asking what you think of the reform proposals that have emerged.
Karen Pollitz: I think we’ve got a structure of reform that is generally consistent across the bills: a mandate to buy coverage, some kind of requirements on employers to contribute, an oft-repeated guarantee that “if you like what you have, you can keep it.” We’ll get a new more organized marketplace where private insurance will be sold to individuals and some small employers and market reforms that would generally outlaw medical underwriting—with two huge exceptions.
Lester Feder: What are those?
Karen Pollitz: The wellness adjustments that are in the Senate bill are very very similar to medical underwriting. They would allow insurance companies and employer health plans to vary peoples premiums and/or cost-sharing by thousands of dollars a year per individual based on health status if it is done in the context of a wellness program, and the wellness program is “reasonably designed” to improve health status or to change behavior. “Reasonably designed” is determined by the insurance company and the employer health plan. So as you enroll in coverage, insurance companies can require you to fill out a health risk assessment, submit to a physical examination, give blood samples, urine samples, cheek swabs. They can measure pretty much any aspect of your health status that they want — as long as they can make a case that it is reasonably linked to your own personal behaviors – and then charge you more.
Lester Feder: Smoking, obviously, would be a major target of these wellness programs, but does that also the door to pre-screening of HIV status?
Karen Pollitz: The door is completely open. There are no limits on what can be measured. So yes, sexually transmitted diseases, unplanned pregnancies, blood pressure, blood cholesterol, blood sugar. This provision is in both of the Senate bills. It is not in the House bill yet, but that wasn’t for lack of trying on the part of the advocates.
There are a lot of members in town who are interested in seeing wellness programs in the final bill. I think there is a very powerful emotional feeling on the part of many members that they want to see more cost-containment, and that people’s personal behavior seems to be an important component in health status. Who wouldn’t want people to take personal responsibility for their health? That’s the way wellness programs get pitched. There are a lot of wellness vendors who are pitching this, but the legislation they seek also re-opens the door to medical underwriting and the insurance companies of course would love that.
In the context of an employer health plan where wellness programs all began, you could at least argue or hope that there might be some support built around this to help people live healthier lives—like opportunities to take off time during the day to take a walk, or providing healthier food in the company cafeteria—but the Senate Committees would actually allow wellness adjustments for the individual market, where the only program or tool to modify behavior is to charge higher premiums or higher deductibles, and it is literally thousands of dollars a year. It’s a lot of money.
Lester Feder: What other major concerns do you have about the bills as they currently exist?
Karen Pollitz: The Senate Finance bill and the House bill create a worrisome opportunity for health insurance to be sold across state lines. States could join into compacts and agree to do some things jointly with regard to health insurance. Here I should pause and just say, we have an interstate compact today for life insurance, and about 35 states have joined the interstate compact. But life insurance products really don’t vary all that much: you pay a premium, and then you die, and then your beneficiaries get a payment. Also, people buy a life insurance policy once, then carry it with them throughout their life as they move from state to state. In the life insurance compact, states get together and agree to product design standards, and then insurers can file their products for approval in one place in the compact as opposed to filing the same product in all the compacting states.
But health insurance is very different than life insurance: plans have different covered benefits, different standards of medical necessity, and networks of providers. People change coverage all the time, benefits and premiums change, and, particularly if they become chronically ill, people may make dozens or hundreds of claims for health care in a year. There’s no such thing as an interstate compact for health insurance today. The House and the Senate Finance bills create an opportunity for a health insurance compact post reform, but they offer zero language about what the compact is supposed to do. By contrast, the life insurance interstate compact today has very specific and limited authority to set product standards and review product filings.
Much more worrisome, Congressional bills do specify that one of the states in the compact—only one—will regulate health insurance in all of the compacting states. (States, by the way, are defined as the 50 states, the District of Columbia, and the US Territories.) That doesn’t happen under the life insurance compact; each of the compacting states retains full authority to regulate life insurance sold to their residents. In fact as I’ve been talking to people who work with the interstate compact for life insurance now and I read them this one-state-will-do-the-enforcement language, they have laughed out loud.
Lester Feder: Explain why that’s bad.
Karen Pollitz: It’s an accountability issue. If I’m an insurance company and I pick Guam as my regulating state, and only the Guam insurance commissioner can enforce the rules, then I’m pretty confident that when I sell my policies in Florida, no one is going to be watching what I do. If anybody complains, it’s going to be very hard for them to get through to the Guam commissioner, let alone get any assistance from them.
Lester Feder: But if a state is worried about protecting its people from another state’s lax regulation, it wouldn’t enter into a compact presumably.
Karen Pollitz: That’s what you would think, and that’s what I would hope. But insurance companies are very powerful in state legislatures. And if they descend on state capitals with armies of lobbyists and say to the part-time state legislators—many of whom work in the insurance industry in their full time jobs— “This compact will expand choice and make health insurance cheaper,” it is not lead-pipe cinch that they would lose in every state.
Lester Feder: What do you think about the design of the exchanges?
Karen Pollitz: They’re pretty similar. What seems to vary is two things: first, who gets to purchase coverage in the exchange. And secondly whether the exchange is an exclusive market, whether it competes with an outside market, and whether it’s regulated differently than the outside market. Under the House bill, the exchange is the exclusive market. In the Senate HELP bill, the exchange is just another place where anybody can buy health insurance and the minimum benefit standards, the rules are different outside the exchange. Inside the exchange only qualified plans can be covered, outside the exchange you can still sell policies that don’t even cover the minimum benefits.. The Finance bill is in between. The exchange is not an exclusive market, coverage can still be bought inside or outside, but the rules that govern coverage are the same, no matter where it is sold.
Lester Feder: What is at stake in that debate?
Karen Pollitz: I think the exchange is intended to be a more organized, more protective market place, more consumer-friendly, easier to monitor. The moving pieces in health insurance are constrained so that competition in health insurance means something. When people compare two policies, they can really see that they are comparing apples to apples. If exchanges are just another venue where health insurance can be sold and we can still have a combination of apples, and oranges, and avocados, and rocks, and things that aren’t even close to health insurance, then I think it makes it very hard for people to shop and to make comparisons. That makes it harder for competition to result in cost savings. And it makes it harder to protect consumers against abusive marketing practices.